Will Verizon, Redbox Speed Movie Releases?

By Quentin Fottrell

As part of its deals with several major studios, Netflix agreed to delay the release of many new films – much to the frustration of some subscribers. But analysts say the online video streaming deal between Verizon and Redbox announced Monday may change that by introducing fresh competition into the market.

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Verizon and Redbox – owned by Coinstar – said they will form a service to stream TV shows and movies over the Internet. Verizon will have a 65% stake in the business and Redbox, known primarily for renting movies through kiosks, will hold the other 35%. There is plenty of room for competition: Currently, Netflix has about 20% of the 2011 box office films available to watch, according to Netflix spokesman Steve Swasey, butthe movies are generally released on Netflix “some months” after the regular DVD release.

Verizon has one advantage over other online streaming companies, say analysts: it already has a vast army of customers. The company added 1.5 million total wireless subscribers during the fourth quarter of 2011, boosting its base to 108.7 million connections, according to its most recent figures. This may help act as an incentive to studios who want to showcase their stars and promote new movies, says Yung Trang, president of TechBargains.com. “Verizon can promote this service to their large subscriber base,” he says. “The new service has a lot of potential and could be a rival Netflix.”

Representatives from Redbox and Verizon did not respond to requests for comment.

The timing is right for a new entrant into the market given the recent missteps by Netflix over its recent price increases and attempts to split its DVD/streaming business, experts say. Verizon and Redbox plan to launch their service in the second half of 2012. “People aren’t that happy with Netflix raising prices,” Trang says. “Redbox brings to the table the experience of dealing with the TV and film industry.”

In its favor, Netflix has a head start on price – Netflix still only charges $7.99 per month for unlimited streaming – a paltry sum compared to most monthly cable bills. Amazon charges $79 a year for its own Amazon Prime service, which offers subscribers free two-day shipping and free streaming. Yang says those prices will be hard to beat. Netflix doesn’t disclose the exact number of titles available, but InstantWatcher.com says the total number of titles hovers at around 14,200. Amazon Prime has over 11,000 titles.

And Verizon is unlikely to offer unlimited online video streaming on its service, analysts say. “Verizon’s current LTE plans are capped at two gigabytes to five gigabytes of usage per month, enough for about two to five hours of viewing absent any other activity,” says Craig Moffett, senior analyst with Bernstein Research. As SmartMoney.com previously reported, Verizon has the right to “throttle” customers or reduce data speed of customers who download the highest amount of data on their cell phones when they stream movies and download music. Analysts say bandwidth – like electricity or water – is not a finite resource. If Verizon did manage to offer deals on wireless streaming of its movies, Trang says, “It would be a huge hit.”